Comment on the forex market reaction to no interest rate hike

The SA Reserve Bank has kept the repo rate unchanged. We are not really seeing any effects on the forex market filtering through, as most of it has already been priced in: the expectation had been that, with inflation being within the 3%-6% target range, the Monetary Policy Committee would keep the repo rate unchanged.

It has been a pretty quiet and flat day today, with a range of about 6 cents in the US dollar rand exchange rate. We haven’t seen much action and we haven’t seen much volatility today. The general feeling is that many people are sitting tight and waiting to see what happens with tomorrow’s analysis from the ratings agencies and whether or not South Africa’s potential credit rating downgrade would be postponed.

I don’t believe there is much room for us to escape a downgrade, but I do think that there is an opportunity for us to avoid it tomorrow, especially with the ANC elective conference coming up which will set the tone for a lot of policy changes that have been suggested.

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